With the Chinese New Year holidays set to begin, sellers across Asia say that they are generally feeling optimistic about their prospects for the post-holiday period, as per Chemorbis. Sellers point to their expectations of seeing better demand after the holidays along with higher upstream costs as support for their firm stance on prices.
Spot ethylene prices on a CFR Northeast Asia basis have gained $75/ton since the start of January. Spot propylene prices on FOB Korea basis are up around US$95/ton since the start of January while spot styrene prices on an FOB Korea basis have risen by around US$20/ton since the start of January, although styrene prices have lost some ground since hitting their highest levels in more than a year in the middle of the month. Although crude oil and naphtha have been trading at levels below their early January levels recently, a number of sellers are now predicting that the recent unrest in Egypt will push energy prices higher over the days ahead after crude oil futures on the Nymex settled US$3.70/barrel higher last Friday on concerns over the political situation in Egypt.
For the most part, the increases witnessed in feedstock prices have not been mirrored by similar increases in polymer prices in China’s import market, feeding expectations that cost pressure will push prices higher after the holidays. According to data from ChemOrbis Price Index, spot offers for homo-PP injection and raffia on a CFR China basis have gained $30-50/ton since the start of January, leaving import sellers offering at the lower end of the price range offering at prices insufficient to cover their theoretical production costs based on spot propylene prices. In addition to cost concerns, sellers pointed to the large number of scheduled turnarounds at Asian PP plants as further support for their expectations of higher prices. Meanwhile, spot offers on a CFR China basis in the PE market have been mostly unchanged from the start of January in spite of the steady gains in ethylene feedstock costs. Theoretical cost calculations based on the prevailing spot ethylene prices suggest that most HDPE film producers and a number of LLDPE film producers are operating below their breakeven level. Accordingly, most overseas producers have announced their February offers with increases from January, adding that they are planning to take a firm stance on their offers in order to push prices to a level consistent with their escalating production costs.
While spot PS prices have witnessed substantial increases on the lower end of the range when compared with the beginning of the month, PS producers complain that they are also suffering from cost pressure as many GPPS producers are still operating below their theoretical cost level based on spot styrene prices while HIPS producers complained that they are facing rising butadiene and rubber costs in addition to higher styrene prices. Most producers have already voiced their intentions of announcing higher prices, with sellers adding that they expect to see better demand after the holiday period as converters will need to re-stock in anticipation of the upcoming high season for manufacturing. While some converters have been moving to pre-buy in anticipation of stronger import prices after the holidays, other converters have expressed skepticism as to the feasibility of higher prices. While most import sellers are entering the holidays on a firm note, offers for domestic cargoes have seen some slight softening recently as local sellers have agreed to discounts in order to speed up their sales, leading some buyers to predict that import sellers will be unable to push through higher post-holiday prices if domestic prices fail to move higher. Other players have also cast doubt on the strength of the expected post-holiday up-tick in purchasing activity, saying that they expect the rise in demand to be smaller when compared with last year owing to the government’s ongoing efforts to rein in inflation.